Opinion
No. 31655.
April 22, 1935.
1. CORPORATIONS. Statute making "debts" due from corporation a charge upon its property after dissolution includes tort demands ( Code 1930, sections 4170, 4172).
Term "debts" is used in Code 1930, sections 4170 and 4172, in its larger sense as signifying anything for which one is liable or bound to another, or which may be exacted of one.
2. CORPORATIONS.
Failure of creditor of corporation receiving notice of dissolution thereof to file claim does not result in canceling or barring claim (Code 1930, sections 4170, 4172).
3. CORPORATIONS.
Express reservation by statute of rights of creditors of corporation after dissolution carries with it necessarily reasonable means for enforcement of rights so preserved (Code 1930, sections 4170, 4172).
4. CORPORATIONS.
Corporation's existence as debtor is continued after dissolution only for purposes of suit against it for adjudication of debt or demand upon its merits, and creditor, upon obtaining judgment against corporation, may pursue stockholders to whom corporation's assets have been distributed (Code 1930, sections 4170, 4172).
5. CORPORATIONS.
Claimant who failed to assert tort claim against corporation pursuant to notice given creditors of corporation's dissolution could, after dissolution distribution to stockholders of assets, and discharge of liquidator, sue corporation for adjudication of merits of claim, preliminary to taking steps against stockholders as distributees of corporation's assets (Code 1930, sections 4170, 4172).
6. CORPORATIONS.
Persons asserting claims against corporation after final decree for corporation's liquidation was entered and liquidator discharged were not required to obtain permission of chancery court to sue corporation, and suit against liquidator was no longer proper (Code 1930, sections 4170, 4172).
APPEAL from the chancery court of Hinds county.
HON. V.J. STRICKER, Chancellor.
Action by Lorena Bates and others against the Mississippi Industrial Gas Company. Decree for defendant, and plaintiffs appeal. Reversed and remanded, with directions.
Price Price, of Magnolia, and Chalmers Potter, of Jackson, for appellants.
The court order limiting time to file claims was invalid.
Sections 4170, 4171 and 4172, Code of 1930.
In this case the appellants do not contend that a court of equity where it appoints a receiver for an insolvent company may not by proper order require all creditors or persons having claims against such company to file the same with the receiver or some other person designated by the court within a limited period or have their claims barred in so far as the property in the hands of the court is concerned, but the chancery court of the first district of Hinds county in the case at bar has no authority whatsoever to cut off the rights of these appellants to proceed at least in an in personam action for a redress of their wrong.
16 Fletcher on Private Corporations, page 545, par. 7898; 29 Yale Law Journal 481; 1 Clark on Receiverships, page 806, par. 759.
Upon the familiar principle, the word "may" in a statute is to be construed "must" or "shall" when the public interest and rights are concerned.
Blake v. Portsmouth Concord Ry. Co., 39 N.H. 435.
It is a familiar rule of law that the language of a written instrument is ordinarily to be construed according to its plain and natural meaning. This rule applies unless there is something in the particular case which obliges the court to give the word a different meaning.
Hampden Trust Co. v. Leary et al., 72 N.E. 89.
The word "may" is construed to mean "shall" whenever the rights of the public or third persons depend upon the exercise of the power or the performance of the duty to which it refers.
Wheeler v. Chicago, 24 Ill. 105, 76 Am. Dec. 736; State v. Henry, 87 Miss. 114.
The Legislature has decreed that where the charter of a corporation has expired or been annulled in that event it must be kept alive for a term of three years thereafter for the purpose of being sued.
As to the right to proceed in personam at least the order was ineffectual. We find that the Legislature has determined that where a corporation charter has expired or been annulled that it must be kept alive for a term of three years for the purpose of prosecuting and defending suits.
25 R.C.L. 985; 59 C.J. 1089-90.
Under the first section in section 4171, any action that is brought by or against the corporation must be brought in the corporate name. The last sentence in said section does not provide any period during which the corporation can sue or be sued and we most respectfully submit that this sentence only deals with who shall be the party plaintiff or defendant, as the case may be, and in so far as the question of the time within which suits may be brought the first sentence in this section stands unimpaired and with full force and effect.
In the case at bar the plaintiffs only discovered who was the owner of the truck that side-swiped the school but in which they were riding after the corporation had been dissolved and its liquidator discharged. Suit, however, was brought well within the three year period.
In the event appellants are in error as to construction of the statute the order of the court discharging the administrator was improvidently made and should have been set aside and these plaintiffs allowed to proceed with their suits.
Lundie v. Hazlett, 112 So. 591, 147 Miss. 808; Nash Mississippi Valley Motor Co. v. Childress, 125 So. 708, 156 Miss. 157; Dunn v. Dent, 153 So. 798; Sullivan County Railroad v. Connecticut River Lbr. Co., 57 A. 289.
Green, Green Jackson and Wells, Wells Lipscomb, all of Jackson, amicus curiae.
The jurisdiction of the chancery court of Hinds county is exclusive and not delegable.
Ex parte Baldwin, 291 U.S. 615, 78 L.Ed. 1023; Sunflower County v. Bank of Drew, 136 Miss. 191, 204, 101 So. 192, 193; Love v. Sunflower County, 144 So. 856, 165 Miss. 507; Love v. King, 145 So. 620, 166 Miss. 776; Gross v. Irving Trust Co., 289 U.S. 344, 77 L.Ed. 1245; U.S. v. Bray, 225 U.S. 205, 56 L.Ed. 1055.
The appellant is judicially estopped by election to apply for leave to sue.
Coulter v. Robertson, 24 Miss. 278; Bank of Mississippi v. Duncan, 56 Miss. 166; Port Gibson v. Moore, 21 Miss. 157; McCandless v. Clark, 159 So. 542; 20 C.J. 117; Murphy v. Hutchinson, 48 So. 178; Hatley Manufacturing Co. v. Smith, 123 So. 887, 890, 154 Miss. 846; Quitman County v. Miller, 117 So. 263, 150 Miss. 841; Simon v. Williams, 140 Miss. 854, 105 So. 487, 488; Whittington v. Cottam, 130 So. 746, 158 Miss. 847; Hanson v. Field, 41 Miss. 711; FitzGerald v. Reed, 9 S. M. 103; Simolton v. Bacon, 49 Miss. 589; Bunch v. Shannon, 46 Miss. 525; Nicholson v. Heidenhoff, 50 Miss. 56.
Before appellant should be allowed to rescind the release judicially sanctioned, clearest proof of fraud requisite and restoration of the consideration a condition precedent.
McCain v. Cochran, 120 So. 826, 153 Miss. 237; Burroughs v. Jones, 78 Miss. 238, 28 So. 944; Whittington v. Cottam, 130 So. 746, 158 Miss. 847; FitzGerald v. Reed, 9 S. M. 103; Sivley v. Summers, 57 Miss. 713; Turnbull v. Railroad, 71 Miss. 1029, 16 So. 646; Jones v. Railway Co., 72 Miss. 22, 16 So. 379, 382; Alabama Vicksburg R.R. v. Kropp, 92 So. 694, 129 Miss. 616; Smith v. St. Louis San Francisco R.R. Co., 73 So. 803, 112 Miss. 878; Rowe v. Fair, 128 So. 90, 157 Miss. 351; United Fuel Gas Co. v. Railroad Commission, 278 U.S. 307, 73 L.Ed. 395.
The chancellor correctly had discretion to disregard the alleged evidence of the detective.
United Traction Co. v. Monohan et al., 190 N.Y.S. 425; Commonwealth v. Downing, 4 Gray 31; People v. Loris, 131 App. Div. 130; Wigmore on Evidence, sec. 2066; Jones Commentary on Evidence (2 Ed.), 4892; Salt Lake City v. Robinson, 125 P. 657; 71 C.J. 953, 954; Hortetter v. Bower, 74 Fed. 235.
Wells, Wells Lipscomb, of Jackson, and Hugh V. Wall, of Brookhaven, for appellee.
Under the common law the effect of a dissolution of a corporation is to put an end to its existence for all purposes whatsoever and to destroy every one of the faculties possessed by it, so that thereafter it cannot make by-laws, hold meetings, make or take contracts, sue or be sued; and all debts to or from it become extinguished; all actions by or against it abated; and its real property reverts to the grantors or donors thereof or their heirs, and its personal property escheats to the crown or to the state.
14A C.J., sec. 3803, page 1149; 8 Thompson on Corporations (3 Ed.), page 692, sec. 6506; 7 R.C.L. 737, sec. 749.
The common law rule has now been abrogated by statutes in nearly every state in the Union. These statutes are all in derogation of the common law and are to be given a strict construction.
14A C.J., page 1159, sec. 3817; 47 A.L.R. 1397; Torry et al. v. Robertson, 24 Miss. 192.
Mississippi Industrial Gas Company was dissolved pursuant to section 4170, Mississippi Code of 1930.
If the common law rule obtained there would not be the slightest difficulty in deciding this case. Counsel for movants admits, or is compelled to admit, that if movants have any right whatsoever to proceed with their suits it must be accorded to them under section 4171.
It would seem that it was the intention of the Legislature that section 4170, Mississippi Code of 1930, should provide a complete and adequate procedure in the chancery court by which a corporation could be dissolved without looking to the old methods which were first incorporated in the Code of 1857.
Under section 4170, Mississippi Code of 1930, the dissolution takes place in the chancery court and the chancery court has full power to make orders for the protection of creditors, as was done in the case at bar.
Jacobs v. E. Bement's Sons, 126 N.W. 1043; Roe et al. v. Durham, 71 So. 109.
The word "shall" is mandatory. The word "may" is not mandatory.
The only reason for judicial construction of any word employed in a statute is an effort on the part of the court to get at the legislative intent. The legislative intent in the case of this statute is perfectly manifest for the simple reason that the statute originally read "shall" and the Legislature deliberately amended the statute so as to make the word read "may."
The chancery court in the case at bar, pursuant to the implied powers necessarily conferred on it by section 4170, caused notice to be published for creditors and rendered a final decree of dissolution adjudicating that all claims not proved were barred. The six months within which an appeal from this decree could be taken elapsed and the decree became absolutely final, and these movants cannot now collaterally attack the same.
59 C.J. 1053 and 1079, sec. 635.
An in personam action against a discharged liquidator and a defunct corporation that has been divested of all its earthly possessions without any view toward reaching the property of said corporation would seem to be an anomoly.
The decree rendered by the chancery court is eminently correct, the only decree which the court could lawfully render under the circumstances, and it should be affirmed.
Even if the chancellor possessed the discretion to either permit or to refuse to permit appellants to proceed with their suits against the discharged liquidator and the dissolved corporation, he was eminently correct in declining this permission.
It is also well known chancery practice that a sworn answer in chancery, except where, as in a bill of complaint, answer under oath is waived, constitutes evidence.
Griffith's Mississippi Chancery Practice, sections 407, 569 and 570.
The release executed by Sibyl Coghlan in favor of Price Brothers recites "we do hereby acknowledge full and complete satisfaction of our claim, or claims, for damage on account of said injury." This constitutes a full, complete, and unconditional release.
A covenant not to sue is a covenant by one who had a right of action at the time of making it against another person, by which he agrees not to sue to enforce such right of action.
53 C.J. 1197; Griffith's Mississippi Chancery Practice, section 477.
Receiver appointed by judicial authority, in the absence of statute to the contrary, cannot be sued without leave of court which appointed him.
Rea v. O'Bannon, 158 So. 916.
On August 24, 1932, the Mississippi Industrial Gas Company, a domestic corporation, filed, in the chancery court of the county of its domicile, an ex parte petition for the dissolution of the corporation. The petition was joined in by all the stockholders, and averred that the corporation owed no debts so far as known to it, although there were possible obligations which should be propounded. The petition complied in all respects with the provisions of section 4170, Code 1930, governing the subject of voluntary dissolutions of corporations. The chancery court on the same day entered an order appointing a liquidator, and directing the liquidator to give four weeks' public notice to creditors to present their claims on or before October 1, 1932. On January 28, 1933, the liquidator made his final report showing that the publication to creditors had been made, that no claims had been filed, and that all outstanding matters had been settled and concluded, and asking his discharge. On February 3, 1933, the court entered a final decree discharging the liquidator and dissolving the corporation.
On February 13, 1934, appellants filed their separate actions in the circuit court of Pike county against the Mississippi Industrial Gas Company for damages in actions of tort alleged to have accrued to them on December 11, 1931, as a consequence of a collision, on a public highway in that county, with a truck driven by a servant of the corporation, then and there in and about the business of the said corporation. On March 17, 1934, appellants applied to the chancery court in the matter of the dissolution proceedings, first above mentioned, for permission of the chancery court to prosecute the actions in Pike county, and appellants offered proof to the effect that the alleged injury to them was caused by a "hit and run" driver, and that appellants did not discover until October 24, 1933, that the said driver was an employee of the Mississippi Industrial Gas Company then and there engaged in and about his master's business. The chancellor, upon hearing the application, denied it, and entered an order prohibiting appellants from prosecuting their actions either against the liquidator or the company, from which order or decree appellants have prosecuted this appeal.
Section 4172, Code 1930, in pari materia with section 4170, Code 1930, provides as follows: "On the dissolution of any corporation, either by judgment or otherwise, all its real and personal estate shall be vested in the stockholders therein, in their respective proportions, who shall hold the same as tenants in common. . . . Debts due to and from the corporation shall not be extinguished by its dissolution, but shall be a charge upon its property." By the broad and inclusive terms of the language use in the quoted section, as well as by its close connection with the entire subject in the Code arrangement, this section applies to all dissolutions by whatever manner or means accomplished.
And the term "debts" is also used in its broader sense, so as to include demands founded in tort as well as those in contract; the term is used in that larger sense which "signifies anything for which one is liable or bound to another, or which may be exacted of one." Ætna Ins. Co. v. Robertson, 126 Miss. 387, 406, 88 So. 883, 890. There is no provision in these dissolution statutes for the publication of notice to creditors; and although it is the proper practice, similar to that in receivership, to give the notice in the cases of corporations which have been engaged in any extensive business, it is well settled that a failure of a creditor to file his claim in response to the notice does not result in any canceling or barring it, nor is the effect of the failure similar to that of the bar of the statute of limitations. 16 Fletcher, Private Corporations, p. 545.
Thus the debts against the corporation, including rights of action founded in tort, are preserved unimpaired; and since there can be no debt without a debtor, the express reservation by the quoted statute of such rights implies or carries with it not only the reservation or preservation of a debtor, but also of a reasonable method or means for the enforcement of the rights so preserved. 25 R.C.L., pp. 978-980; 59 C.J., pp. 973, 974; Lewis' Sutherland, Statutory Construction (2 Ed.), sections 504-510. It would not be a reasonable method or means of enforcing such a debt, especially an unliquidated demand or one founded in tort, to require the claimant, as an original step in the procedure, to sue each of the several stockholders to whom the assets have been distributed as a result of the dissolution. This would or might involve as many or nearly as many suits upon the original merits as there were stockholders, and, in foreign jurisdictions, if the stockholders happened to reside beyond the state. And in such suits the amount due might be fixed at entirely different sums in the different suits, and in some of the suits a recovery on the merits might be allowed, and the contrary result reached in others; and such a course of procedure would, in trouble and expense, often result in a practical denial of relief.
It must be considered, therefore, that it was the purpose of the statute to continue the corporation in existence as a debtor so far, and so far only, as relates to the purposes of suit against it for the adjudication of the debt or demand upon its merits, upon which, when judgment has been obtained, the stockholders may be pursued with all the issues fully determined so far as the liability of the corporation was concerned. We hold that this is the available method after dissolution, so-called, and distribution, and continuous until the debts are barred by the statutes of limitation. Compare 14 A.C.J., p. 1202, and see, also, Id., p. 1159.
Although the statute does not so provide or require, we have said that it is the proper practice, as was followed in this case, to appoint a liquidator and to give notice to creditors, in the cases of corporations which have been engaged in any extensive business, although the ex parte petition, joined in by all the stockholders, avers, as was here averred, that there are no debts or claims against the corporation. Often in such cases there are outstanding claims unknown to the corporation, or which it does not consider as a real claim. This is to give claimants the opportunity to come in and make their demands known, so that distribution to stockholders may be deferred, or partially deferred, until all such claims are settled. If, upon notice given to creditors, the creditor fail to file his claim and the dissolution is decreed, the distribution to stockholders is made and the liquidator is finally discharged, the creditor may still sue the corporation as if no dissolution proceedings had ever been instituted, the only disadvantage suffered by the claimant by his failure to file his claim being that after he has obtained his judgment against the corporation he must then pursue the stockholders to whom distribution of the assets has been made, which distribution he could have intercepted had he filed his claim, and had it adjudicated either by the chancery court, or, in tort cases, by the proper law court, permission being had of the chancery court to proceed at law.
Here when these actions were filed in Pike county, the entire matter had been concluded in the chancery court and so far as it was concerned, the final decree of dissolution had been entered and the liquidator discharged. The matter was no longer pending in the chancery court, and the liquidator was no longer an officer of that court. It was therefore not necessary for appellants to obtain the permission of the chancery court to sue the corporation, or to prosecute the suits, and it was no longer proper to sue the liquidator at all. Had the chancery court simply made an order dismissing appellants' petition as unnecessary, the order would have been correct, but, as already mentioned, the chancery court entered an order prohibiting appellants from suing either the liquidator or the company. Consequently, the decree must be reversed, and the cause remanded, with directions that a decree be entered in accordance with the principles outlined in this opinion.
Reversed and remanded.